India says ready to start paying for Iran oil in rupees

India says it is ready to pay for Iranian oil in rupees, but will continue to pay Tehran in foreign currency until the new European Union (EU) anti-Iran sanctions take effect in July.

Indian oil industry sources, who asked not to be named, told Bloomberg on Wednesday that while India can start paying for about 45 percent of the Iranian oil it imports in rupees as of next month, both countries prefer to settle trade in foreign currencies for the time being.

The sources added that increased pressure from the US could lead Indian refiners to start rupee payments earlier than planned even before the EU sanctions take effect.

New Delhi’s rupee payments to Iran may equal a total of at least USD 4 billion a year, and will be deposited in the Indian state-run UCO bank, which does not have US operations and is unlikely to be affected by the global sanctions, the sources said.

India is Iran’s second-largest oil customer. It has decided to maintain bilateral trade with Islamic Republic despite escalating economic and financial measures taken by the West against Tehran over its nuclear energy program.

On March 10, Iran and India announced that they had signed an agreement regarding Tehran’s oil exports to New Delhi based on which India would pay for 45 percent of its Iran crude imports in rupees.

The announcement was made by head of the Federation of Indian Export Organizations Rafeeq Ahmed during an official visit to Iran.

He added that India currently imports USD 9 billion worth of Iranian oil and USD 2 billion worth of goods while exporting about USD 2.7 billion worth of goods.

The US and EU claim that Iran's nuclear energy program includes a military aspect and have imposed international as well as unilateral sanctions to make Tehran give up its nuclear energy program.

New anti-Iran sanctions by the US and EU since the beginning of 2012, aim to prevent other countries from importing the Iranian crude or dealing with its banks, including the central bank.

Iran rejects such allegations arguing that as a committed member of International Atomic Energy Agency (IAEA) and a signatory to the Non-Proliferation Treaty, it is entitled to the peaceful uses of the nuclear energy.

Tehran also points out that despite repeated inspections; the IAEA has never found any evidence of diversion in Iran's nuclear energy program towards military objectives.